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Monarch Regroups

It’s been about a year since my favorite downtown-condo-in-the-making, The Monarch launched its sales effort.Â In this week’s OBJ, Anjali FlukerÂ reports that current market conditions may have the developers modifying their original plans. I doubt they’re alone.

Other new downtown projects include Tradition Towers, The Vue, 55 West, Star Tower, and the Paramount. Most of these are in some state of construction with only The Monarch and Tradition Towers not having broken ground.

In January, Eola Place folded, and it may not be the last, so rethinkingÂ could turn out to be a smart move, since it givesÂ developers the opportunity to alter the projectÂ before “going vertical”.

When I called in earlier in the year, the phones for the proposed 24-story tower were not being answered, but since then it seems that Jaymor-Reed Development have regrouped – although they remain tight lipped about their new plans.

There’s no doubt in my mind that Orlando’s downtown condos will succeed. But timing is everything, and developers who began their plans 3-4 years ago could not have foreseen current market conditions. It will not change theÂ futureÂ – but it may slow things down some.

Meanwhile,Â for buyers this could be moreÂ good news, because desperate developers, ever moreÂ frantic to make their pre-sale requirements, may be prepared to drop their asking price. For more on the best (and safest) Orlando deals, drop us a line here at CondoMetropolis.com.

5 Comments

From: T.Fair 8-20-07:
Interesting post, Marcus. I agree. I think that the downtown Orlando condo market is a bit saturated. I think the whole concept of “downtown living” is great, but mainly appeals to a certain type of buyer; the young professional or buyers b/t ages 25-35. The venues and “faster pace” of downtown appeal mostly to this age group, especially when it comes to living near the clubs, boutiques, restaurants, etc. Older buyers seem more satisfied with being able to enjoy such venues at will w/o living among them. Furthermore, buying power is diminished with downtown condos. While 300K – 400K will get you a VERY nice sized home in a good area, the same amount affords you a 2 br/2bath condo, at roughly 1200 sq ft downtown. The value is in being close to the venues and living in the city.

That said, the reason that condo supply exists at a surplus is b/c of the price point. Let’s assume that my theory of who the condo market most appeals to is correct; most young professionals (age 25-35) aren’t making enough to afford said condos. Let’s take the Solaire, for example. There are a couple 2/br units listed at $389K. In order to afford that comfortably, one would need to make a considerable amount of money. Based on the most recent census, the average income in Orlando is $42K. Furthermore, the percentage of young professionals making more than that is small.

Conversely, condos do attract investors. The only problem is that if you look at houses as investments, they aren’t very attractive. Unless you are able to rent the condo out, you get absolutely no cash flow from the “investment”. Let’s assume that an investor can find a renter, unless the investor paid all cash, the breakeven basis will be high.

Let’s go back to the $389K unit at Solaire for an example. Assuming conservative debt service, with 20% down payment, the mortgage would be around $2K. After HOA’s your all in for about $2500. You’d have to rent for at least that amount just to break even monthly. If not, you’ve just purchased a negative cash flowing investment. The only value is in the upside of being able to sell for a higher price, which is too speculative to accurately value.

Lastly, while this can somewhat be considered a “buyer’s market” due to excess surplus, the recent turbulance in the credit markets suggest otherwise. Even if you have excellent credit, higer rates are decreasing what average buyers can afford.

In conclusion, I really love downtown Orlando and agree that a tremendous opportunity exists, however, not at current prices. Solaire is the cheapest priced project. The Vue, 55 West, Paramount, Star Tower, and 101 Eola are all priced higher. The only way units will begin to sell is if developers realize this is not NY and that such pricing will not work here.

I would have to agree with M.B.’s previous post about the demographic of Orlando and the amount of income that demographic makes. The people that attracted to metro urban living(in a “tiny” 700 sq ft unit for $1,500/mo + HOA) are not only unable to afford them, but are rare in Orlando. There are simply not that many people who are in that age range(25-40) that make enough money to afford living in these condos. It’s hard for me to understand that developers didn’t see this coming regardless of the of the real estate market condition. It will be interesting to see just how low the price drops on the surplus units and seeing these developers open their eyes and admit to their own over-hyped idealistic views.

I have found some good information here and also on Orlando Condo 411 for news on the whole downtown Orlando condo topic. Thanks to all!

Every time I see the condo mania downtown Orlando it reminds me of the great work by Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds. And so I say, nice tulips… and I should add, a fool and his money are soon parted.

I believe the orlando downtown condo market is going to be successful. For a couple of reasons.

I live in one of the new towers, having moved from the Dr Phillips area (which I very much liked as well) I see the draw of the Burbs. But to live downtown I get a sense empowerment I did not get before. To be able to live w/o the need to get into a car all weekend just does it for me.

I also think the market will take care of pricing before too long. I don’t mean that in a negative way at all. Gen Y will save the condo market. They are a very large segment of our population just comming of age, well educated and not afraid to ask for the money they feel they deserve (Esp. for there tech accumen)
They all lean to a minalist way of life and are aware of there carbon footprint. I would be more worried in my old 3700 sq ft Mc mansion than my 1300 sq ft condo that I have not had to turn on the AC or heat in the 2 months I have lived there.

Yes I agree the market is saturated right now. But if you look at this way, there are only 5 or 6 large towers in the downtown core that have less than 2000 unit available total. I think just UCF graduates about 1500 every six months. So time will tell as always. I think it will be alright.

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